Moscow and Kiev exchanged barbs after nearly five hours of haggling in Brussels failed to yield a deal.

"If our offer is rejected then we will shift to a whole other level," Putin told a government meeting in Moscow.

"That is not our choice and we do not want that."

The Russian strongman said Russia was offering Kiev a USD 100 "discount" for a final price of USD 385 per 1,000 cubic metres and accused Kiev of driving the negotiations into a "dead end" by demanding further reductions.

However Ukraine Energy Minister Yuriy Prodan said after meeting with his Russian counterpart Alexander Novak that Kiev could not accept an offer that could easily be withdrawn if Moscow changed its mind.

Ukraine wanted a price set by the market laid down in a commercial contract, Prodan said, “But unfortunately Russia proposed a way of fixing the price which I would call political."

However EU Energy Commissioner Guenther Oettinger, who is brokering the negotiations, said that in his opinion the talks had established some common ground.

"We are still in negotiations," he said. "I can see movement on both sides and both sides will need to continue to move."

The talks are being closely watched to see if both sides really want to bring some sort of closure to an unprecedented stand-off that began with pro-EU protests in Kiev in November.

If successful, they would build on a peace push by Kiev's new President Petro Poroshenko, who yesterday ordered the creation of humanitarian corridors in the country's conflict-torn separatist east, meeting a key Russian demand.

The latest round of talks began on a positive note after Russian gas giant Gazprom said early today that it was delaying by five days a deadline for Ukraine to start paying for gas ahead of time, or risk a cut in its supply.

Hopes were also raised when Putin said in a telephone conversation with German Chancellor Angela Merkel that he had ordered the Russian delegation at the talks to take "a constructive position" in order to reach a "mutually acceptable agreement".

However Oettinger said the talks could take some ten days and the mood appeared to sour before the two sides had even reached the negotiating table when Ukraine Prime Minister Arseniy Yatsenyuk attacked Russia for playing "games" over the latest offer.